Wall Street Journal: Ferrari Finds Smoke Without Fire

Tobacco firm’s continued sponsorship is worth $100 million to Formula One racing teamBy RICHARD GILLIS

Racing fans got a good look at Ferrari’s new Formula One cars in the opening Grand Prix of the 2010 season in Bahrain: In one of the dullest races in recent memory, Fernando Alonso completed 49 laps without incident to take the checkered flag, with teammate Felipe Massa close behind.

But as television cameras follow the iconic red cars during this weekend’s Australian Grand Prix in Melbourne, few of the sport’s millions of viewers around the world will be aware that they are the subjects of a hugely controversial, and expensive, subliminal-advertising campaign.

Gaze at the Ferrari cars for long enough, and you’ll notice that instead of a brand logo, an anonymous barcode symbol appears behind the drivers’ head and on the team’s distinctive red overalls.

For this, Philip Morris International Inc., manufacturer of the Marlboro cigarette brand, pays Ferrari between $100 million and $130 million in sponsor fees, according to F1 Racing magazine, despite the European Union’s ban on tobacco advertising.

Marlboro Logo, Then and Now

The Marlboro logo used to appear on Ferrari’s Formula One car and the distinctive red overalls of its drivers, but after a ban on tobacco advertising, it has now been replaced by a colored barcode paid for by the cigarette maker.

The link between the world’s most elite auto-racing circuit and the tobacco industry goes back a long way: Marlboro first appeared as a sponsor in Formula One in 1972, with the BRM team, and the marketing budgets of Marlboro and other brands including Lucky Strike, Benson and Hedges and West continued to flowed into the sport throughout the 1990s.

The high level of funding from the tobacco industry raised the teams’ cost expectations, according to Ross Brawn, principal of the Mercedes F1 team and a former technical director of the Scuderia Ferrari team.

Mr. Brawn, whose eponymous team won last year’s constructors championship, says the sport is still wrestling with this legacy.

“Formula One budgets were cranked up in the past to a very high level, sustained by the tobacco companies,” he says. “Of course, Ferrari still has the backing of Philip Morris, but the rest of the teams have had to do without.”

Mr. Brawn says that the new spending limits coming into place are “vital to the future of Formula One” and that the success of the Brawn GP team last year proved what could be done.

“With 300 or 400 people employed at sensible cost it is possible to be competitive without tobacco money,” he says. “We’re coming down off that high, but I don’t think you’ll notice the difference in the racing.”

Martin Lindstrom is a neuro-marketing consultant and author of Buyology, a book based on a three-year, multimillion-dollar research project that exposed 2,000 consumers to branding materials while scanning their brains.

He says this research shows that the tobacco industry’s investment in Formula One is still reaping rewards, both in terms of their brand image, and in encouraging people to smoke.

Ferrari drivers Fernando Alonso and Felipe Massa embrace after finishing first and second in the Bahrain Formula One Grand Prix earlier this month.

“I’m endlessly impressed by Marlboro’s ability to take the core values of Formula One sex, speed, innovation, coolness and apply them to a cigarette brand,” says Mr. Lindstrom, a vehement anti-smoker himself. “That is an amazing achievement. Just by showing me a red Ferrari car, much more so than if you show them an advert for cigarette smoking.

“On a personal level I hate it, because the evidence is clear that tobacco sponsorship does make people smoke more, and is not just about switching brands, but professionally there is much to recommend.

“Even though that sponsorship is no longer legal we carried out experiments just showing a Formula One car, and people immediately craved cigarettes. What Marlboro has done is create a huge number of what I call ‘smashable components’ to their brand. They are sending indirect, subconscious signals that are talking to the brain without explicitly telling it we are being sold to.”

Mr. Lindstrom believes his findings have fundamental implications for the sport-sponsorship industry. “Sponsorship works when we are not really aware of the signals that are being sent: The messages get through because our guard is down, not up. A Formula One car passing below me with no logo is an example of this, and as a smoker it creates a craving, Pavlovian effect. When there are no logos around my rational mind tells me I shouldn’t crave those things. Without the logo my intuition kicks in and I want to smoke.”

The tobacco-advertising ban has had a series of unintended consequences, Mr. Lindstrom says. Because firms are unable to use brand logos and conventional channels, the sector was inadvertently liberated from traditional marketing dogma. As a result, cigarette companies are now among the most innovative and sophisticated marketers in the world.

Neuro-marketing remains controversial, but the audience for its findings is growing rapidly among the marketing community, says Paul Brennan of design agency Fitch. He says Marlboro’s relationship with McLaren and now Ferrari is aimed at “owning the color red,” which remains “the holy grail” for many companies seeking to differentiate themselves from competitor brands.

Mr. Brennan says we shouldn’t regard subliminal advertising as a way of “tricking the consumer into buying something they don’t want to,” but rather as a more innovative way of promoting a brand.

Sponsor logos have become a familiar backdrop to top-class sport around the world, but most are failing to make an impression, according to Mr. Lindstrom’s research.

“We are bombarded with thousands of direct-marketing messages a day, very few of which we are able to take in, let alone process in to changing buying behavior,” he says. “Having a logo on the perimeter board is not worth the money, there has to be a synergy, where the brand becomes synonymous with the sport, and better still, becomes a ritual.

“Likewise, rights holders must prove that they are about more than just awareness, which is not as valuable a commodity as it was 20 years ago, when the sponsorship model was built that still applies today.”